You can buy a car that is advertised for $21,600 on the following terms: (a) pay $21,600 and receive a $4,600 rebate from the manufacturer; (b) pay $450 a month for 4 years for total payments of $21,600, implying zero percent financing.
a. Calculate the present value of the payments for option (a) if the interest rate is 1.00% per month.
b. Calculate the present value of the payments for option (b) if the interest rate is 1.00% per month.